Flouting the rules.
Signs of the contagion in Irish banking are proliferating at a tremendous rate.
Signs of the ineffectiveness of our media are just as common. Mostly, what we get is lots of “he said, she said” and no analysis.
Here is one small piece of simple analysis.
The first rule of risk management is ‘don’t put all your eggs in one basket’. In banking this is called ‘avoiding large exposures’. Exposures usually means loans but, in actuality, it refers to both sides of the balance sheet. In our world, this rule is codified in an EU directive all of its own (such is the importance accorded it).
Sect 3.1 of the Large Exposures of Credit Institutions Directive (92/121/EEC of 21 December, 1992)
3.1 A credit institution may not incur an exposure to a client or group of connected
clients the value of which exceeds 25 per cent. of its own funds.
7 Billion from IL&P to Anglo represents in excess of 100% of Anglo’s ‘own funds’, (at
that time) which they and IL&P must have known. This allied with the fact that the transfer
occurred at a time when the bank’s books were under scrutiny means that both organisation’s were actively conspiring to flout one of the principles of banking regulations .
This is outright flouting of bank regulations by two institutions in collusion regarding
the entire balance sheet of one of them in order to decieve the regulator and their
customers. (Not just to corruptly benefit senior executives as they have previously been
Apart from the fact that Min Lenihan did not read the PWC report in full, on Friday he
said that ‘banks move large sums of money all the time’ and that ‘these affairs are
regularly referred to the Regulator by my Dept.’.
These types of movement NEVER happen – except in ‘Wild West’ horror ‘movies’.
He neither attends to the details of his brief nor it seems grasps the impact of those he does encounter- which would seem to me to be a fatal flaw in a barrister let alone a bank regulator and now investor.
It is not a case of sacking a few executives any more and more like the need to suspend the licences of these institutions until we can be assured of their proper conduct.
But which is worse; a Minister who makes these kind of mistakes or a whole cabal of media who fail to catch him doing so.